Question

Sunland Company issued $535,000 of 5-year, 5% bonds at 96 on January 1, 2020. The bonds pay interest annually. Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS Compute the total cost of borrowing for these bonds. Total cost of borrowingt SHOW LIST OF ACCOUNTS Prepare the journal entry to record the issuance of the bonds, assuming the bonds were issued at 104. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS Compute the total cost of borrowing for these bonds, assuming the bonds were issued at 104. Total cost of borrowing

Answer 1

Date Issue Entry 1. Record the Bond Issue Accounts Name Debit Cash (535000*0.96) Discount on Bonds Payable Bonds Payable Record the issue of the Bond with Discount Credit 513600 21400 535000 Total cost of Borrowing interest Paid = 535000*5%*5 = ADD: Discount on Bonds Total cost of Borrowing 133750 21400 155150 Date Credit Issue Entry 1. Record the Bond Issue Accounts Name Debit Cash (534000*1.04) Premium on Bonds Payable Bonds Payable Record the issue of the Bond with Premium 556400 21400 535000 Total cost of Borrowing interest Paid = 535000*5%*5 = Less: Premium on Bonds Payable Total cost of Borrowing 133750 21400 112350